Internal labour markets: a case study

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Abstract

We select one firm from a large data set of firms and study its internal economics. First we prove that the information available allows us to inspect the personnel policies of the firm. Furthermore, this fact allows moving from the case study to more comprehensive studies in personnel economics using institutional surveys. The analysis also shows the patterns of workers' promotions and the differences in the characteristics of insider versus outsider workers. The decision to promote is analyzed. The hierarchic design directly influences the wage policy. Wages are determined to a great extent by the layers of the hierarchy. There are wage premiums upon promotion, even if the worker does not change his place in the organization. When the promoted worker moves up in the hierarchy he comes from the top of the wage distribution at the old job and goes to the bottom of it in the new job. We present evidence on workers' exit and entry to the bottom of the wage distribution, especially in the lower part of the hierarchy.

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